Xiaomi to set up 2 plants, launch more devices in India

Xiaomi’s president Bin Lin told ET that he will be spending a lot more time in India, underlining the South Asian nation’s importance amid challenges in China.

NEW DELHI: Chinese smartphone maker Xiaomi plans to set up two manufacturing plants in India and launch more devices this year as it ramps up its presence in the world's fastest growing market amid a cooling in its home market.

Bin Lin, billionaire co-founder and president at Xiaomi, told ET that he will be spending a lot more time in India, underlining the South Asian nation's importance amid challenges in its biggest market, China.

The India plan includes manufacturing of handset peripherals and components, he said.

"We believe it (China) will be a flat market, if not, even decline," said 48-year-old Lin, worth nearly $1.1 billion (Rs7,480 crore) as per the Forbes list of billionaires.

Conversely, Lin expects India, already the world's fastest growing smartphone market, to further gain steam, selling around 140 million devices in 2016, compared with about a 100 million last year.

"Also, people buying smartphones from ecommerce are also going to grow very rapidly, and we're a big part of that," said Lin, a former Microsoft and Google executive.

He said the intense competition in the Indian market - mirroring the cutthroat competition seen in China some years ago - wasn't sustainable. He expects Xiaomi to be at the top of the list when market share is consolidated.

Meanwhile, Xiaomi India head Manu Jain said that single-brand retail licence was an exciting opportunity for the company, but didn't specify if the smartphone maker had already applied for one. However, a company ?spokesperson separately said that Xiaomi has applied for a licence?, joining Apple as among the top foreign brands opting for a direct presence in India, which eased foreign direct investment rules for single-brand retailing in November.

Xiaomi entered India in July 2014, and started local manufacturing just over a year later. It has partnered with the world's largest contract manufacturer, Foxconn, which now makes 75% of the company's phones at its plant in Andhra Pradesh. Xiaomi sells well over 1 million phones a quarter.

"We talked to Foxconn about opening two new factories, they're in discussions with some of the provinces (states)," Lin said. Jain said the company is pushing to get "at least one of them up and running within this year".

The company will also take advantage of the Union Budget recommendations, which made local manufacturing of batteries, chargers and other mobile phone accessories cheaper. "We've already started working on bringing some of those local sourcing suppliers to India," Lin said.

In India, Xiaomi will launch Mi 5 - its latest flagship unveiled at the recent Mobile World Congress in February in Barcelona - in April, and two more devices this year - one next quarter and another in the second half. It also plans to enter new product categories in 2016.

While the Mi 5 will not be made in India initially , Lin indicated the price of the phones could be between Rs 20,000 and Rs 27,000, based on China prices.

Besides investing in Indian startups, the company, last valued at $45 billion, is also actively talking to content owners and makers to curate content for Indian buyers which will find its way onto Mi devices sometime this year, Lin said.

The company's aggressive manufacturing based expansion comes on the back of a weak 2015, when it dropped out of the top five, launching only two devices of note. Lin said the company was beefing up local operations in terms of R&D for India-specific products and after sales services. A direct result of that was Redmi Note 3, which went on sale last week with over 30,000 units, all sold within two seconds.

Having beaten competition, including Samsung and Apple, in its home market, Xiaomi now intends to repeat the feat in India, which Lin felt, was passing through the same extreme competitive times as China a few years ago.

"There were 150 brands in China, now only 30 are left where six of us control 60% of the market. In India, there are 170 brands and its going up... it will drop to 30 here too because it's not sustainable," he said.

Although the battlefield lines are drawn, Lin is confident of taking on rivals and eventually leading in India.

The company has thrived in open markets like China and India, which together are the top two markets by unique number of smartphone users. US is No 3 in this respect, but is still second largest after China in terms of annual smartphone shipments.

"We've been competing with them head-to-head in China and we have an upper hand already, so it's proof that our model is very powerful," Lin said, adding that he will take several learnings from the India manufacturing process to China for improving efficiency.

Its presence in carrier-led markets such as the US, France, Germany and the UK will continue on an experimental basis - the company sells only its accessories there. "The carrier share in the US is about 30-40%... for us to enter at least half the market should be open."